Artificial Intelligence has seen massive adoption in the past decade due to its transformative role across various industries and use cases. The AI industry has grown 2x since 2017, especially after the advent of Generative AI, which has shown businesses the true potential of AI. 

But is it all sunshine and roses? While AI has become essential to modern enterprises, from task automation to enhanced consumer experiences, it comes with its own Pandora’s box of risks and ethical issues.

Recently, the US Federal Trade Commission (FTC) issued a notice threatening to hold companies responsible for using AI to propagate bias or injustices, and the European Union suggested a set of AI policies that might result in significant fines if broken. Therefore, identifying and handling these risks is imperative to safeguard your business interests.

In today's competitive and increasingly digitalized corporate environment, protecting against the large and growing variety of AI dangers may seem overwhelming. However, ignoring the risks or avoiding AI altogether is not a feasible option. So, where should businesses begin?

In this article, we will look at 5 key strategies for managing AI risk that you can implement to ensure that your AI adoption journey experiences smooth sailing. 

What is AI Risk Management?

AI risk management is the process of identifying, analyzing, and addressing any potential risks associated with implementing and using AI.

What are the Risks of AI?

Some existing and emerging AI risks are - 

• Data privacy
• Bias
• Model training
• Technological vulnerabilities
• Fair and ethical use

Why is AI Risk Management Important?

AI has completely revamped the way organizations work and operate. With the growing amount of data across critical areas such as operations, pricing, training, marketing, customer service, and security, businesses need to adopt AI to stay ahead of the curve. However, they need to optimally manage the varied threats that AI and its rapid development bring with it. 

Here are four reasons why managing AI risk is a priority- 

1) Mitigation of Security Threats

AI systems are susceptible to data breaches and attacks, particularly as the use of digital devices grows. These dangers may result in monetary losses, harm to one's reputation, and invasions of privacy.

AI risk management ensures that our digital environment is safe by identifying these possible vulnerabilities and implementing countermeasures.

2) Reduction of Ethical Risks

Because of biases in its programming or data, AI has the ability to discriminate or do harm unintentionally. This is especially risky in domains where AI conclusions might have practical consequences, such as lending or hiring.

AI risk management works to safeguard people from potential harm by ensuring that AI functions morally and fairly.

3) Enhancing Trust in AI

We are depending more and more on AI as digital adoption increases. But people will only use AI if they trust it.

Through effective AI risk management, trust can be built by demonstrating the safety and dependability of AI-based technologies. 

4) Ensuring Compliance

As AI grows more widespread, laws are changing to keep up with it. Heavy fines and legal problems may arise from noncompliance.

AI risk management helps businesses stay out of legal hot water by ensuring that AI technologies abide by these rules.

Identifying AI Risks

A helpful method for considering the potential risks is to apply a six-by-six framework that associates different risk categories with prospective business scenarios. Here is an example- 

How Do You Manage AI Risk?

Here is a consolidated AI risk management framework that you can use to get started- 

1) Define the Context and the Objective

First and foremost, ascertain the environment in which the AI system will operate.

Think about the following:

• What functions will the AI system carry out? Why is AI used? How will it help your organization's goals?
• In what social, legal, and financial context will the AI system function?
• Who are the individuals or organizations that the AI system will impact? These might be regulators, consumers, or staff.

You should choose the problem that your AI project has to solve, the pertinent and accessible data, and the methodology for measuring the system's output. It is possible to ensure that the system generates the intended results and removes any needless risks by clearly outlining the objectives.

2) Identify AI Risks and Monitor Them Regularly

In the above section, we outlined how you should identify AI risks across various business segments. Once you are done identifying them, you should monitor and audit them on a regular basis. 

One of the best ways to find unsettling trends and risks in your system is to regularly monitor it and audit the data inputs, results, and algorithms. Additionally, compare the AI system's results with the data to identify any biased outcomes that may be discriminatory.

3) Assessment of AI Risk

It is essential to carefully assess each potential risk when it has been found, taking into account both its chance of happening and the possible consequences. This thorough evaluation will help prioritize which risks need to be taken care of first, making sure that resources are distributed efficiently. This process can be significantly aided by the use of tools like risk matrices and decision trees, which offer an organized framework for assessing and displaying the numerous risk elements at play. 

Organizations can establish proactive measures for minimizing adverse outcomes and make educated decisions by considering the probability and severity of each risk.

4) Implement Mitigation Strategies

A thorough mitigation strategy must be developed and put into action for every risk that has been identified. These tactics could involve a variety of actions to deal with various facets of risk management:

• Preventive measures: The risk of data breaches and privacy violations can be greatly decreased by implementing robust security protocols and data anonymization mechanisms. For instance, access controls and encryption techniques can be used to protect sensitive data and stop illegal access.
• Detective measures: Setting up sophisticated monitoring programs and instant alarm systems can assist in seeing such problems before they become serious. By taking a proactive stance, any security issues or operational disruptions are lessened in impact and allow for timely intervention. The detection skills can be further improved with regular vulnerability scans and threat intelligence analysis.
• Corrective measures: To successfully address and solve potential issues, it is essential to establish clear protocols and response strategies. Creating a clear data breach response plan that specifies what can be done in the event of a security issue is part of this. A comprehensive incident management process and post-incident analysis can be carried out to help identify areas for improvement and stop similar incidents in the future.

5) Form an AI Committee

Forming a team to oversee or manage your AI projects is an excellent method to reduce their risk. Members from several departments, such as data scientists, risk management specialists, marketing directors, programmers, and designers, should make up your AI committee. This committee's responsibility should be to monitor particular occurrences that could directly jeopardize the systems and address problems before or as they emerge.

The Bottom Line 

Artificial Intelligence has the potential to transform the ways organizations do business. While the potential and opportunities are thrilling, executive teams are just now starting to realize how many new risks are involved. It's possible that current methods for assessing and managing risk won't be able to handle the rapid and extensive implementation of these new methods that corporate executives are hoping for. Companies will have the control they need to operate AI morally, legally, and financially once they identify and implement an effective risk mitigation strategy. 

{{cta-button}}